Condo market seeking respect
Condo market seeking respect
Betty Beard
The Arizona Republic
Dec. 29, 2005 12:00 AM
The Arizona Republic
Dec. 29, 2005 12:00 AM
Some housing experts still look down on condominiums, but this might be the year that these little housing units finally get some respect.
The condo market in the Southeast Valley isn't just a group of Mesa patio homes popular with winter visitors anymore. It now includes penthouses priced at more than $1 million being built along the shores of Tempe Town Lake and luxury apartments being converted to condos in Ahwatukee Foothills and Chandler.
The market for condos, townhouses and patio homes in the Southeast Valley also changed radically over this past year because the lower-priced offerings became one of the most affordable options for new home buyers and young families who were priced out of soaring single-family homes. And Tempe's man-made lake became a place where people are willing to live a dense lifestyle.
While Realtors aren't all convinced this condo activity is a good thing, they agree it started because the prices of single-family homes climbed rapidly during the past year.
"This last year just wiped out first-time home buyers unless they can buy condos," said Elaine Sans Souci, a Realtor with Keller Williams East Valley in Gilbert.
A year ago, she could have showed someone willing to spend $150,000 a detached, single-family home. Today, if anyone wants to buy a nice home for less than $200,000 they likely have to look at a condo, she said.
Some housing experts remain leery about condos because they remember the last condo construction and conversion craze in the late 1970s and early 1980s. The condo market soured, and some of those converted condos eventually reverted to apartments.
Casey Strunk, chief executive officer of Diamond GMAC Real Estate in Scottsdale, is especially blunt, saying "When you see conversions coming into any market, it's time to get out . . . They are the hardest thing to get to work - condos, townhouses or patio houses. They are just so far overdone in my opinion it's not even funny."
He started his real estate career in 1979, during the height of the previous conversions, and saw many of those units depreciate and being sold for sinking prices.
Jay Butler, director of the Arizona Real Estate Center at Arizona State University, points out that homeowners don't like having homes 12 feet apart.
"What are you going to do if you are six inches apart?" he said. "The more intensive, dense lifestyle brings a greater requirement to get along with your neighbors.
"They are not a real preferred lifestyle. We like our open space and the whole bit."
Nevertheless, condos have become so popular not only as homes but investments in the past year that their prices appreciated at least 30 percent in the Southeast Valley, according to Sans Souci.
The average 1,100-square foot condo that sold for about $120,000 last December is selling for about $170,000, she said.
Josh Crockett, an account executive with a home-warranty service company, got tired of paying rent and bought a 1,600-square-foot condo a year ago in Gilbert for $179,000. "I didn't feel like I needed a full home. I didn't want to worry about landscaping," he said.
The condo had appreciated from March to December 2004, and he thought he was buying at the top of the market. But since he bought, its value has soared about 50 percent.
"I didn't buy it with the intention to buy an investment," he said.
Lois Tiedemann, with Keller Williams Southeast Valley, said condos can be excellent investments because their associations maintain the exteriors and make sure they are kept up.
"Condos or townhouses basically take care of themselves as long as you have good renters in there," she said.
She bought one herself in Tempe in February 2003 and said it has doubled in value.
At least 7,800 apartment units are being converted to condos and at least, 3,300 new units are being built this year throughout the Phoenix area, according to Butler.
The conversions aren't going to make much of a dent in the rental market because condos represent only about 8 percent of the housing units. And Butler believes most condos will end up being rentals anyway, especially since many of them appeal to winter visitors and retirees.
Brad Johnson, a researcher with CB Richard Ellis, said there are at least 330,000 apartment units in the Phoenix area.
"By no means will there be a shortage of rental units," he said.
But will the construction and conversions continue in 2006?
Johnson said he read that investors are starting to pull back in some areas to avoid risk of a market downturn.
"Lenders with three deals they are financing might hesitate to take on a fourth or fifth to see how the first ones sell," he said.
The condo market in the Southeast Valley isn't just a group of Mesa patio homes popular with winter visitors anymore. It now includes penthouses priced at more than $1 million being built along the shores of Tempe Town Lake and luxury apartments being converted to condos in Ahwatukee Foothills and Chandler.
The market for condos, townhouses and patio homes in the Southeast Valley also changed radically over this past year because the lower-priced offerings became one of the most affordable options for new home buyers and young families who were priced out of soaring single-family homes. And Tempe's man-made lake became a place where people are willing to live a dense lifestyle.
While Realtors aren't all convinced this condo activity is a good thing, they agree it started because the prices of single-family homes climbed rapidly during the past year.
"This last year just wiped out first-time home buyers unless they can buy condos," said Elaine Sans Souci, a Realtor with Keller Williams East Valley in Gilbert.
A year ago, she could have showed someone willing to spend $150,000 a detached, single-family home. Today, if anyone wants to buy a nice home for less than $200,000 they likely have to look at a condo, she said.
Some housing experts remain leery about condos because they remember the last condo construction and conversion craze in the late 1970s and early 1980s. The condo market soured, and some of those converted condos eventually reverted to apartments.
Casey Strunk, chief executive officer of Diamond GMAC Real Estate in Scottsdale, is especially blunt, saying "When you see conversions coming into any market, it's time to get out . . . They are the hardest thing to get to work - condos, townhouses or patio houses. They are just so far overdone in my opinion it's not even funny."
He started his real estate career in 1979, during the height of the previous conversions, and saw many of those units depreciate and being sold for sinking prices.
Jay Butler, director of the Arizona Real Estate Center at Arizona State University, points out that homeowners don't like having homes 12 feet apart.
"What are you going to do if you are six inches apart?" he said. "The more intensive, dense lifestyle brings a greater requirement to get along with your neighbors.
"They are not a real preferred lifestyle. We like our open space and the whole bit."
Nevertheless, condos have become so popular not only as homes but investments in the past year that their prices appreciated at least 30 percent in the Southeast Valley, according to Sans Souci.
The average 1,100-square foot condo that sold for about $120,000 last December is selling for about $170,000, she said.
Josh Crockett, an account executive with a home-warranty service company, got tired of paying rent and bought a 1,600-square-foot condo a year ago in Gilbert for $179,000. "I didn't feel like I needed a full home. I didn't want to worry about landscaping," he said.
The condo had appreciated from March to December 2004, and he thought he was buying at the top of the market. But since he bought, its value has soared about 50 percent.
"I didn't buy it with the intention to buy an investment," he said.
Lois Tiedemann, with Keller Williams Southeast Valley, said condos can be excellent investments because their associations maintain the exteriors and make sure they are kept up.
"Condos or townhouses basically take care of themselves as long as you have good renters in there," she said.
She bought one herself in Tempe in February 2003 and said it has doubled in value.
At least 7,800 apartment units are being converted to condos and at least, 3,300 new units are being built this year throughout the Phoenix area, according to Butler.
The conversions aren't going to make much of a dent in the rental market because condos represent only about 8 percent of the housing units. And Butler believes most condos will end up being rentals anyway, especially since many of them appeal to winter visitors and retirees.
Brad Johnson, a researcher with CB Richard Ellis, said there are at least 330,000 apartment units in the Phoenix area.
"By no means will there be a shortage of rental units," he said.
But will the construction and conversions continue in 2006?
Johnson said he read that investors are starting to pull back in some areas to avoid risk of a market downturn.
"Lenders with three deals they are financing might hesitate to take on a fourth or fifth to see how the first ones sell," he said.
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